Crude Gives Back
Crude Oil – Oil futures are slightly lower this morning after jumping more than three dollars on Friday. Several OPEC ministers have hinted at a production cut at the March meeting to head off the possibility of a worldwide glut. Venezuelan President Hugo Chavez is set to lose a key legal battle with ExxonMobil over one of the country's nationalized Oil fields and has threatened to cut supplies to the U.S. in retaliation. Royal Dutch Shell indicated that the company may not be able to honor all of its Nigerian export contracts due to political instability and sabotage. The geopolitical news comes on the heels of the largest weekly increase in Crude Oil inventories in nearly four years, showing that the U.S. is well-supplied at the moment and giving the threat of an OPEC production cut more credence. The Dollar is weaker this morning, which could act as price support for the market. Rallies on Thursday and Friday can also partially be attributed to bears' inability to drive prices below key support between 86.00 and 87.00 in the March contract. The market has rejected an initial push toward recent highs of 92.71 this morning. A breakout above this high would validate a double bottom formation on the daily chart. Momentum is outpacing the RSI indicator, suggesting a positive near-term bias. Support comes in at 89.19, 86.60 and 85.21, while resistance can be found at 93.17, 94.56 and 97.15.
S&P – S&P futures are slightly higher this morning after the index gave back 10 points on Friday. Motorola is said to be in talks with Nortel Networks to combine their cell phone infrastructures. Elsewhere, Yahoo's board is expected to reject Microsoft's recent bid as too low, and the Redmond, Washington giant is likely to counter by taking its case directly to Yahoo's shareholders. Higher Oil prices may weigh on the market today and volume will probably be light ahead of the flurry of economic data the market will have to digest later this week. Equities have seen some capital inflows of late, with optimistic traders beginning to believe that the market is slowly bottoming out. The March e-mini S&P chart gives evidence of a lack of a consensus opinion on market direction. After rejecting the 1400 mark, March futures have held the 1320 area, indicating the market is not yet set to make new lows. Momentum is outpacing the RSI indicator, which suggests that the near-term bias remains to the upside. Support comes in at 1319.50, 1309.00 and 1296.75, while resistance can be found at 1342.25, 1354.50 and 1365.00.
Rob Kurzatkowski, Commodity Analyst
